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GameStop up 10% in retail; AMC stock also rose

A screen shows the logo and trading information for GameStop on the floor of the New York Stock Exchange (NYSE) March 29, 2022.

Brendan McDermid | Reuters

Shares of two meme stocks surged on Thursday, adding an unexpected wrinkle to a market that has been in volatile trading for more than a month.

GameStop rallied more than 30% and was halted by volatility multiple times, before ending the session with a 10.1% gain. Shares of the theater chain AMC Entertainment increased by more than 8%, down from an increase of more than 20% at one point.

GameStop and AMC turned heads early last year when a group of retail investors coordinated trades in online chat rooms to create short squeezes on these stocks being held by hedge funds and hated by other players. The metric rallies have caused great pain to many hedge funds and other short sellers associated with these speculative names.

Since then, stocks have retreated from their peaks, and short sellers have begun to build positions again. According to FactSet, AMC has a short-term profit of 19.5%, while GameStop is at 21.4%. Short interest is a measure of the portion of a company’s available stock, or floating stock, that is sold short.

Those large bets against the company can sometimes lead to huge one-day swings in the stock, as hedge funds move to close short positions when the stock rises, thus creating more more buying pressure. This process is called short pressing.

Even with Thursday’s big moves, stocks are still well below their highs from the first half of 2021. GameStop, which rallied as high as $483 per share on the last day of January last year, finished at 89. .57 USD/share on Thursday.

AMC, which hit an intraday high of $72.62 last June, closed at $11.20 per share on Thursday.

Because the market capitalization of companies has fallen so much, it may be easier for just a few stores of business, or even a large fund, to force a new squeeze.

However, Ihor Dusaniwsky of financial analysis firm S3 Partners said Thursday’s move is likely to cause short-term pressure due to the health of short positions.

“A wild ride for these stocks, but while there may have been some short sellers forced out of their positions to take their recent gains in the market, today’s losses on the short-term term is a drop from the profits they put on these names last week and month,” Dusaniwsky said.

In 2021, both AMC and GameStop took advantage of their temporarily inflated share price to sell more shares and raise capital. AMC CEO Adam Aron made a big push to get retail investors to join the rally, answering questions from small dollar traders about earnings calls and showcase shareholder privileges in physical cinemas.

AMC used part of the money raised to acquire other cinemas around the country. However, the company also purchased shares in a small gold mining company The beginning of this year had an unstable financial history.

– CNBC’s Yun Li contributed to this report.

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